McDonald’s and Its Crisis Essay

Custom StudentMr.
TeacherENG
1001-04
27 November 2016

McDonald’s and Its Crisis

What should a company do when its core product is considered “unhealthy” or even “harmful” by the public? Is it even possible for such a company survive and thrive; or will it have to shut down its business? McDonald’s fast food has for a long time been considered unhealthy by the public. In recent years, the health conscious trends have become increasingly popular. Moreover, many scientific studies and findings have surfaced and successfully confirmed that children’s increasing intake of fast food, which often contains high sodium content, sugars, saturated fats, and calories, for a long period of time would lead to childhood obesity. Moreover, obese children have a much higher risk of many health problems such as coronary heart disease, high blood pressure, diabetes, and certain cancers–all of which are fatal if left untreated.

In 2010, a mother from California sued McDonald’s over the company’s marketing practice of Happy Meal. The mother claimed that McDonald’s used alluring toys to lure kids into Happy Meal. This lawsuit, which might be viewed by many as senseless and absurd, was one of McDonald’s biggest cases. In order to come out of the lawsuit ahead, this largest fast food chain had to undergo some major organizational changes. In this paper, we would like to use the knowledge learned in the class to analyze the event (the lawsuit) and its effects on McDonald’s.

The paper will have four main parts. In the first part, we provide a brief introduction of the company, McDonald’s, and the lawsuit. In the second part, we will use the concepts learned in class to analyze Happy Meal’s influencing strategies and the organizational changes during and after the suit. We believe that Happy Meal’s influencing strategies deserve our attention as they were the main causes of the crisis. Since its Happy Meal’s influencing tactics were so effectively and successfully executed, McDonald’s became the obvious target of the mentioned legal dispute. In the third part, we will offer our evaluations, pros and cons, of McDonald’s strategies and tactics in handling the crisis.

Finally, in the fourth part, depending on our evaluation of how McDonald’s control of the situation, we want to offer our recommendation to parts of the company’s strategies which in our opinions could have been improved. Also, since we overall felt that McDonald’s managed the crisis extremely well, we recommend its strategies to be implemented to Jack in the Box, which faced a similar situation to McDonald’s. However, unlike McDonald’s which vigorously fight for the continuation of its using toys to push Happy Meal sales, Jack in the Box decided to drop toys in its Happy Meal when it was faced with the pressure from the public. We believe McDonald’s implementation of strategic changes could have helped Jack in the Box to put toys back to its Happy Meal.

Introduction

McDonald’s Corporation is the world’s leading food service organization. The corporation started out as a small drive-through in 1948 by two brothers, Dick and Mac McDonald. In 1961, Raymond Albert Kroc, a salesman, saw a great opportunity in the market at the time and bought the business from the McDonald brothers. By 1967, McDonald’s began its first business expansion to countries outside of the United States. This unyielding expansion resulted in the opening of 23,000 McDonald’s restaurants in 110 countries in 1994. Today, McDonald’s, the leading fast food chain, had twice the market share of its closest U.S. competitor, Burger King. In fact, McDonald’s market share represented 7 percent of total U.S. eating-out sales (Cohen, 2009, p8-2, p8-3).

There are several major influences and factors–such as government, customers, social trends, and so forth–which play an important role in shaping organizational behavior.In the recent years, McDonald’s corporate image has been negatively affected by adverse publicity. For example, McDonald’s has been criticized of paying its employees low wages and enforcing an aggressive anti-union policy throughout its fast-food empire. Furthermore, the corporation was heavily condemned by the public for exploiting children market and causing childhood obesity. Indeed, McDonald’s has been using advertising which mainly targeted children.

As a result, according to the survey to American school student in 1996, 96 percent of all children could identify Ronald McDonald (Cohen, 2011, p8-5). How was McDonald’s able to achieve the above result? McDonald’s children marketing strategies were very simple but extremely effective–to give small toys as a treatment to children in order to appeal to their interests. With the repeated uses of this psychological influencing tactic, children would subconsciously make a connection between McDonald’s and toys. Therefore, children, who were under the influences of McDonald’s marketing strategies, could not help to think of McDonald’s whenever thinking of toys.

The plaintiff, Monet Parham, a California mother of two, sued McDonald’s overly exploiting children market on Oct 2010 (Dan, 2011).She claimed that McDonald’s gave out alluring toys that come with the meals in order to lure kids into unhealthy diet. The mother also stated that “McDonald’s make it so much harder to say no to her kids when they are really want those toys” (York, 2010). The CSPI (Center for Science in the Public Interest) confirmed that “kids do not have the cognitive maturity to understand the persuasive intent of advertising” (York, 2010). Later on, the ban of serving Happy Meals with toys was easily passed by the Board of Supervisors in an 8-3 vote, which would take effect on Dec 1st, 2011 if McDonald’s didn’t meets the nutritional standards of meal in San Francisco till that time (San Francisco Happy Meal Toy Ban Takes Effect,2012).

McDonald’s quickly made response to this event. The fast food chain’s spokeswoman, Bridget Coffing, told the LA Times newspaper: “We are confident that parents understand and appreciate that Happy Meals are a fun treat, with quality, right-sized food choices for their children that can fit into a balanced diet,” (York, 2010). McDonald’s said that it would defend itself against the lawsuit. Meanwhile, it started offering apple slices and milks in the new Happy Meals. Eventually, the San Francisco judge dismissed the suit since McDonald’s was able to meet the required nutritional standards. In the next part, we will assess this problem relate to the concept of influence and organizational change.

<II> Course Concepts Related To The Event

Influence

“Influence is any communication which produces a change in an action and/or an attitude in one or more people.” Influence is one of the most important management strategies in any organization. A strong influence tactic includes role of planning and dialogue, establish credibility, frame goals and common ground, vividly reinforce your position and connect emotionally (Wong, Influence and persuasion, 2012).

In this case, although McDonald’s was sued by alluring children, they indeed occupied the children market successfully. In order to establish an influence, one must first establish communication–exchanges of dialogue. McDonald’s did good at emotional influence and ingratiation. The company created a clown character named Ronald and featured it on local TV in early 1960s. Then, people were employed to perform live Ronald McDonald clowns at children’s birthday parties held in restaurants. Ronald McDonald had a magic touch with children giving McDonald’s an important advantage over its competitors in the children market (Cohen, 2011, p8-5).

With Ronald McDonald mascot so successful as a communication tool, McDonald’s went one step further to establish its credibility in children’s minds. This was not hard for the leading fast food chain as it is a common notion–and quite true–that children are in most cases easy to influence. Then, how did McDonald’s make children trust it? The answer is easy–make the children happy. For example, children were happy when gifts such as Ronald dolls and wristwatches were given free with every purchases of Happy Meals. McDonald’s also used toys of characters from popular movies appeal to children. In this aspect, they used influence of ingratiation effectively. Ingratiation means do something what the person likes. For example, a recent and very successful Happy Meal promotion was a tie-in with the popular DreamWorks Animation film “Shrek Forever After.”

The meals included toy watches fashioned after the movie’s characters Shrek, Donkey, Gingy and Puss in Boots (Dan, 2011). Furthermore, McDonald’s needed to create a common goal–as to what it stands for–with children. With free toys and the always smiling Ronald McDonald, McDonald’s convinced children that the company and its restaurants stands for happiness and enjoyment. However, just establishing common goal and credibility is not enough to make an effective influence, the communicating message and/or idea must be vividly reinforced and emotionally connected with the target audience. According to the Fast Food FACTS Report, young people viewed enormous amounts of fast food advertising.

Every day, the average preschooler saw 2.8 fast food ads on television, the average child saw 3.5, and the average teen saw 4.7. Teens listened to approximately one radio ad per day. Children were exposed to more than 1,200 traditional fast food ads per year while teens saw and heard more than 2,000. (Harris, Schwartz & Brownell, 2010, p132)

Thus, with its spending of $900 million in media in 2009, McDonald’s made sure that the company’s image was vividly reinforced and emotionally connected in the minds of many children (Harris, Schwartz & Brownell, 2010, p132). In sum, McDonald’s influencing strategies were so successful that 90 percent of the children go to McDonald’s once a month (Fast Food Marketing to Children, 2010).

Nevertheless, McDonald’s effective influencing strategies made it a target for one of the biggest lawsuit in the fast food industry. In the next part, we will discuss how McDonald’s applied its strategic changes to overcome the crisis.

Organizational Change

For years, critics have been criticizing McDonald’s and its role in America’s obesity problem–specifically the franchise’s aggressive marketing strategies toward children. As the lawsuit pointed out, McDonald’s used toys to lure children and in turn set kids up for a lifetime of health problems.

The leadership and management of an organization must be prepared for a turbulent environment which demands more complex planning for the future. The phrase “organizational change” is about a significant change in the organization, such as reorganization or adding a major new product or service. In fact, there are six forces creating the need of change—the changing nature of the work force, technology, economics shocks, changing social trends, the “new” world politics, and the changing nature of competitions. (Stephen,1992, p.270)

From this lawsuit, we could find evidences of a major force, changing social trend. As the health conscious became a more and more popular, people will be looking for healthy food that is low in calories, fat and sodium. In the American, childhood obesity has more than tripled in the last 30 years. Furthermore, according to the Centers for Disease Control, seventy percent of obese children have higher risk for cardiovascular disease, and are at “greater risk for bone and joint problems, sleep apnea, and social and psychological problems such as stigmatization and poor self-esteem” (“Centers for disease,” 2012). The publics pointed a finger at McDonald’s, the world’s largest fast food company, who use of Happy Meal toys to lure children. This situation made McDonald’s under heavy criticism from public health officials, parents, lawmakers and so on because they are frustrated with rising childhood obesity rates and weak anti-obesity efforts from fast food restaurant operators.

Oftentimes, organizations are confronted with problems in the environment or with internal contingencies suggesting that “current ways of doing things are not effective” (Miller, 2012, p180). When facing the changing forces, organizations often make changes gradually. Of course, the implementation of planned change is neither a simple nor a straight-forward process (Miller, 2012, p181). In fact, it took McDonald’s six years (from 1984 to 1990) to react to pressure group tactics and litigation before starting to adapt its service offer to the dietary concerns of its customers. At the very beginning, the company just made some modestly changes, such as using light oil, adding 2% milk into the menu before actually launching new products such as the McVeggie, the McLean, and pizza in the 1990s (Joanne & Caroline, 2006).

If we consider McDonald’s step-by-step changes, in the above examples, organizational planned change in response to social trend, the fast food franchise’ reactions to the CSPI (Center for Science in the Public Interest) lawsuit then can be defined as “unplanned change”. According to Coombs (1999, p.2), organizational crisis is “an event that is an unpredictable, major threat that can have a negative effect on the organization, industry, or stakeholders if handled improperly.” In other words, crisis is unplanned change that can rock an organization and all the people associated with it.

In response to this lawsuit, on December 15 2010, McDonald’s posted on its website a Response to CSPI Lawsuit:

We are proud of our Happy Meals and intend to vigorously defend our brand, our reputation and our food. We stand on our 30 years track record of providing a fun experience for kids and families at McDonald’s. We listen to our customers, and parents consistently tell us they approve of our Happy Meals. We are confident that parents understand and appreciate that Happy Meals are a fun treat, with quality, right-sized food choices for their children that can fit into a balanced diet. (Bridget, 2010)

Later on, McDonald’s made it clear that the fast food chain had begun to make changes to the composition of Happy Meals in response to parental and consumer pressure. It also pledged to reduce the sodium content in all of its foods by 15 percent, with the exceptions of soda and desserts. Moreover, it set a deadline of 2015 for limiting salt, and said that it would spend the rest of this decade cutting back on sugars, saturated fats and calories and making adjustments to portion sizes. The new Happy Meals were introduced in September and launched across the company’s 14,000 restaurants on April 2012.

They would all include apple slices, but in a smaller amount of three to five slices than the current eight to 10 offered as an alternative (Stephanie, 2011). McDonald’s will also offer a fat-free chocolate milk option, along with the option of low-fat milk or the traditional soda. The price is not expected to change (Andrew,2011). Furthermore, as part of an effort to provide better access to nutritional information about its foods, McDonald’s developed its first mobile application for the public. Additionally, in 2011, McDonald’s executives toured the country to hear directly from consumers about their concerns (Alex, 2011). In the next part, we would like to offer our evaluations, pros and cons, of McDonald’s strategies and tactics in handling the crisis.

<III> Evaluation

As we could image, the sales of Happy Meals have been a large contributions to McDonald’s daily revenue. Thus, if McDonald’s had lost the lawsuit, the company would have faced a really huge lost on its total profits and taken serious damage on its reputation. On the side of the organization change, we believe that McDonald’s did quite well in the face of the crisis. Organization crisis could be divided into three stages: pre-crisis, crisis, and post-crisis (Miler, 2012, p187).

In the pre-crisis stage, an organization should protect or prevent possible problems. It should make employees have a kind of consciousness of crisis all the time. Indeed, McDonald’s has always been accused of selling unhealthy, greasy food to grownups, and exploiting children through advertising since 1960s (Cohen,2009,p8-6). As a leading company in fast food industry, adverse publicity always be the major problem for McDonald’s. Still, McDonald’s couldn’t find a way to solve this problem at all. It is necessary that a company grow with self-awareness against any problem. After all, McDonald’s had got unfavorable publicity in this event what had happened before.

During the crisis stage, it is very important that the company should make correct and wise decisions in order to salvage the damaged reputation. As we said before, on one side, McDonald’s projected itself as a company which was proud of its products and would vigorously defend its reputation in order to calm down concerned customers . On the other side, McDonald’s announced that it would reduce the portion of French fries in every Happy Meal by half and replace them with apple slices.

It even promised to start serving healthier food in the new Happy Meal to meet the nutrition standards. Indeed, McDonald’s made very quick response to this event, and they also pointed out that parents could always choose not to buy happy meals for their kids instead of criticizing the corporation’s marketing strategies. After making the changes, McDonald’s operation was not impacted too much.

Lastly, in the post-crisis stage, company should take lessons from this and establish backup plans for similar crisis which may happen in the future. Apparently, even after the crisis, Happy Meal was not banned. Furthermore, it has become a huge hit for McDonald’s and even made the company one of the world’s largest toy distributors. As a result, more and more companies wanted to corporate with McDonald’s.

For example, many animation film companies wanted to team up with McDonald’s in order to take advantage of this fast food franchise’ huge market influence in promoting their movies. In sum, with its achievements overweight shortcoming, McDonald’s had a good handle on the whole crisis. Nevertheless, even the crisis had passed, this leading fast food chain suffered from public criticism regarding its products. In the future, we believe that McDonald’s should develop an effective strategy to help improve its brand image and a better risk management methodology to help mitigating coming crisis.

In the next part of the paper, we want to offer our recommendation to help McDonald’s better handling similar situation. Also, since we overall felt that McDonald’s managed the crisis extremely well, we would like to recommend its strategies to be implemented to Jack in the Box, which faced a similar situation to McDonald’s. However, unlike McDonald’s which vigorously fight for the continuation of its using toys to push Happy Meal sales, Jack in the Box decided to drop toys in its Happy Meal when it was faced with the pressure from the public. We believe McDonald’s implementation of strategic changes could have helped Jack in the Box to put toys back to its Happy Meal.

<IV> Recommendation and Implementation

Recommendation for McDonald’s

Obviously, McDonald’s managed the crisis really well. In fact, the nutrition of Happy Meal was improved as the calories were reduced substantially. Because the lawsuit was dismissed, McDonald’s continued sell Happy Meal with toys. In the end, McDonald’s didn’t have to change its children’s influence strategy. Even though McDonald’s made its Happy Meal healthier, we believe that their changes to the meal could be bigger, such as change the cheeseburger to a healthier burger with vegetable inside and make chicken nuggets with real chicken instead of minced meat. Also, McDonald’s could reduce the attraction to children or change a different way. For example, the fast food chain could design an advertisement to advocate children to eat healthy, such as drink milk and eat fruit. Furthermore, McDonald’s could optimize the influence aspect. For instance, McDonald’s could use influence strategy to encourage more people to do charity and educate children to eat healthy and exercise frequently.

Recommendation for Jack in the Box

In 2011, under heavy public’s criticism, Jack in the Box decided to stop giving out free toys with the purchases of Happy Meal. Obviously, the scale of the crisis faced by Jack in the Box was much smaller than that faced by McDonald’s. However, we felt that Jack in the Box could benefit greatly by learning from McDonald’s way of handling its crisis. We also have some recommendations for Jack in the Box based on the successful influence strategy of McDonald’s. According to the survey, McDonald’s Happy Meal accounted for about 10 percent of the chain’s U.S. sales in 2010. The sales of McDonald’s Happy Meals alone were more than Jack in the Box’s total sales (Maureen, 2011).

This fact showed us that the influence strategy used by McDonald’s was extremely effective. A spokesman of Jack in the Box said that the franchise’s target customers were “the frequent fast food consumer” or adults from 18 to 34. Therefore, we recommend Jack in the Box to use the same influence strategy to their target customer. The fast food chain could also use emotion and/or ingratiation influence to attract customers. For example, Jack in the Box could design online games for adults who gained access to the games with free codes offered with purchases of Happy Meals. Moreover, the company could design a discount card for the customers who accumulate a certain sum of consumption.

Unlike McDonald’s which vigorously fight so that it could continue using toys to promote Happy Meal, Jack in the Box decided to drop toys in its Happy Meal when it was faced with the similar pressure from the public. We believed that many of the McDonald’s organizational changes could be copied and apply in Jack in the Box. This would allow Jack in the Box to continue selling its Happy Meal with toys. For example, Jack in the Box could change the composition of Happy Meal toward a more healthier trends—such as reducing the sodium content, sugars, saturated fats, and calories to its foods; including vegetables and fruits in the menu; and offering tea, juice, and milk as alternatives to the traditional soda beverages. Jack in the Box also needed to let its customers know of its commitment in making its products healthier.

The reason provided by Jack in the Box regarding its letting go of Happy Meal’s toys was that it waned the Happy Meal to appeal to parents. Brian Luscomb, Jack in the Box’s spokesman, commented: “Rather than promote a toy we’ve focused on the quality of products in our Kid’s Meals, like a grilled cheese sandwich on sourdough, grilled or crispy chicken strips, or a hamburger. We believe that providing these kinds of options is more appealing to a parent than packaging a toy with lower-quality fare”(Bernstein, 2011).

However, we believed that Jack in the Box could benefit greatly from expanding its Happy Meal’s target market to include children. To achieve this, Jack in the Box would need to facilitate strategic change–”the process of formulating, implementing, and evaluating decisions that enable an organization to achieve its objectives” (Wong, Organizational change, 2012). In this case, the strategic plan would include extensive products innovation. For example, Jack in the Box could use popular toys and online games to attract children to its Happy Meal. The burger franchise chain could also build playgrounds inside its stores. This offered children with fun and healthy exercises.

Implementation for Jack in the Box

As we discussed above, Jack in the Box could drew on McDonald’s successful tactics to appeal more customers to consume their products. We found McDonald’s influence tactic could be successfully implemented on Jack in the Box due to two main reasons.

The first reason is the industry similarity. Jack in the Box is one of the nation’s largest hamburger chains with more than 2,200 restaurants in 19 states. Also, just like McDonald’s, Jack in the Box is also a member of the fast food hamburger restaurant (FFHR) industry. This is an industry characterized by high competitiveness and risk. Although Jack in the Box is concentrated on the West Coast–primarily in California, the competition is still intensive. In this industry, McDonald’s is the only fast food chain to occupy nearly 13 percent of the US market (McDonald’s Report, 2010). There is no reason that Jack in the Box could not benefit from learning from the market leader, McDonald’s.

The second reason is the easy-to-influence target customers. As we mentioned before, Jack in the Box’s target consumer are youth, aged 18 to 34. This group of customer is the most active part. They are independent buyers. This means that they could choose the thing they want without asking their parents’ permission or admission. Another character of this customer group is economic dependent. This group of customer typically has incomes and also can take charge of their money. The situation is much better than McDonald’s children market.

Also, this group customer of Jack in the Box likes keeping pace with the trend. We think if Jack in the Box could use the influence tactic cater to its target consumers, they could further expand their market share in the future. However, in implementing aggressive marketing strategies, Jack in the Box would certainly be criticized by the public. Still, we believed that if Jack in the Box continues making its Happy Meal healthier and supporting the surrounding community through various charity activities–such as donating part of its Happy Meal’s profit to children hospitals, giving free Happy Meals to the homeless, and so forth–, it can enjoy increase profit and at the same time maintain good public image.